So where’s the developer’s benefit in all this? Aside from a block or two as a “Thanks for everything”? They would’ve paid for all the sub-division costs, which would’ve been significant, considering the land size.

Servicing would be an issue for me. The alternative would be to just go small – remove house, sub-divide, sell, albeit for a smaller profit. Build on from that. Rinse and repeat.

Thanks, Terryw.

I’m looking for any information that would tell me how I could minimise land tax with my next purchase (i.e. how to structure the ownership of the next IP, and the next one, and so forth), what the future tax effects would be (e.g. how a property owned under a Trust would be different to that owned by an individual – future CGT, negative gearing, claiming losses, income rules, etc.).

Would need more info on the company/trust scenarios. From what I’ve read it can be a complicated structure and limits lending ability.

I have an IP in a different state, but keen to keep it local, as I know the market better. I’m in SA.

never too late, that's certainly an alternative we could consider, but the lack of people renting out the second property during that first year means 100% of the loan expenses will have to be covered by us during that period. Otherwise if there are renters inside, at least we'll only cover some portion of the loan, not everything. At the end of the day, though, the CGT we may end up paying could be the same (or similar) to what we otherwise could have paid to the bank during that one year period, should we choose to do everything as you've suggested. It really comes down to careful calculations and figuring out what alternative works best for us. I'm seeing my accountant this week, and we'll discuss it further.

There have been some really helpful suggestions in this forum, and good sources of information. I've also been digging myself for more info, so I'll see how it all goes.

Thanks again!

Terryw, I can assure you businesses can afford to pay tax a lot more than what I can, and with their financial resources, they can probably afford better tax lawyers and accountants than what I can. Presuming their company structures, trust set-ups, and what not… they probably don't pay as much as what they theoretically should, anyway.

My frustration stems from the fact the ATO will be getting something for nothing from me, without lifting a finger to develop the block of land we own or contributing to the process in any way. Despite the fact that we'll move into the second property eventually to decrease the CGT bill several years down the track, we'll still be liable for it, even though that property would've been our home for X amount of years.

As I mentioned previously, I plan on doing this several times over, so I would prefer to buy, develop, build, and sell. I won't have the luxury of time on each property to live in in order to avoid CGT. Theoretically in that case, unless I find me a really good accountant, tax will be paid after each property is sold off.

Richard, so even though I have a regular income from my job, can I not be classified as a developer, as in this instance development will clearly be happening? Obviously this will be for the purpose of completely eliminating the CGT liability. I plan on doing this more than once or twice, and don't wish to be hit with a CGT bill at the end of each project.

I'm not sure if I'm understanding you correctly – does holding the property for more than 12 months decrease the CGT liability to 10%?

@ Kiwi Property Guy – thank you! You've certainly shed some light on what I may end up doing in the future, and your suggestions had seriously crossed my mind – buy +CF first, and as that portfolio builds up, start concentrating more on areas with greater capital growth potential. That's not to say, though, that +CF IP's in "worse off" areas haven't grown significantly in capital value over the last 5-6 years. Some have doubled in value.

I know it's completely wrong to buy an IP just for tax purposes, as at the end of the day you're just funding a loss over an entire year. And then at the end of it, you still don't get 100% of it back. I'd have to sell to cover my losses, but as I said before, why sell when you're buying a property for a long-term investment to begin with? I'll certainly need a CEO-type salary to fund a few negatively geared properties, and still have money to live on

@ Scott No Mates – I'm definitely looking at IP's. I'm very cautious when it comes to taking risks re: investments, but do realise you need to jump into it sometimes to reap the rewards in due course. You're certainly right about the tax aspect of it, though, although I want the best of all worlds –> +CF IP's, + capital growth, and very little tax

Richard, I'm not sure which loans you're talking about, but every time I put a lump sum (when I can afford it) into my loan, I make my lender recalculate both repayments and interest (at no cost to me), which definitely reduces as a result of the lump sum. It's helping me out this way, and reduces my minimum repayments. I can then, on top of them, make extra repayments to save years and interest off the loan.

The rest is now becoming clearer and the post has certainly helped me in making a decision how to set up the IR loan.

Thanks.

Hi,

Thanks for your replies so far.

Richard, I don't have a line of credit against my residential property, nor an offset account against the loan. I'm very cautious when it comes to line of credits or maxing out a loan for an IP (as is the case here) to pay off another loan. Although I do see where you're coming from.

I'd like to think if I cross securitise my current home with the new IP, down the track with all fingers crossed, the new IP's sale price will be adequate to pay off that loan, which will remove my residential home from the IP loan. Plus I don't have those loan facilities set up you mentioned, and want to use as much of my equity as possible, to a reasonable extent, for the new IP.

I also plan on setting this whole thing up myself, without having to deal with a broker. I'll just go through my lender through normal channels. Main idea at this stage, though, is to gather as much information as possible for my benefit, so I know how to deal with them without being forced into a loan I don't want to obtain.

I'm thinking with the equity I have and which I can use, I won't need to obtain MI on the new loan, and won't wait years until I can save 20% of the property's value in order to secure it.

Thanks again.